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35% corporate tax to hinder e-commerce growth

  • Published at 11:27 am June 11th, 2017
35% corporate tax to hinder e-commerce growth
A 35% corporate tax for the next fiscal year on the country's emerging e-commerce sector will hurt its future prospect, said Shameem Ahsan, chairman of eGeneration, also former BASIS president. Shameem sat with the Dhaka Tribune's Ibrahim Hossain Ovi in an exclusive interview recently to give his insight on how to boost the sector. Do you think the proposed budget will lure investment from home and abroad? What more needs to be done to attract investments? Foreign Direct Investment (FDI) inflows into Bangladesh is showing continuous growth, but the government has to ensure business friendly environment to keep up the trend of FDI inflows. The government has exempted tax from IT industry, which is a great move. Besides, it has allocated Tk11,000 crore for all ministries to implement ICT activities for the next Fiscal Year 2017-18 which will definitely lure investment from home and abroad. I think the government should remove the three levels of taxes at managerial level of the Venture Capital fund to attract more foreign investment towards the country's information and technology sector. Do you think the proposed budget is ICT industry friendly? If yes, please, elaborate your view on that. What should the government offer to make it more investment friendly? Though the government exempted tax from software industry, there are a few good news for ICT industry in the proposed budget for the upcoming fiscal year. In the proposed budget, the government allocated Tk3,974 crore for the ICT Division, which was Tk1,835 crore in the current fiscal year. The flat 1% tax on 94 computer accessories and other devices will also boost the hardware sector in Bangladesh. The government listed the ‘alternative fund’ through Venture Capital (VC) in tax exemption. There is still a long way to go to make a supportive environment for ICT companies. Is the allocation enough to materialise Digital Bangladesh? Building a digitised Bangladesh is a continuous process. It needs enough allocation for every budget with proper implementation plans. As a lower middle-income country, it is difficult for Bangladesh to allocate required fund in a budget for the ICT sector to realise its vision of a digital country. But the ability to effectively implement the budget allocation matters for the success. In this regard, the government should focus on increasing institutional capacity. What are the challenges to the ICT sector? In availing the contracts of government projects and procurements, foreign IT companies are having privileges. Mega public projects are being solely handled by foreign companies. This is because there is a lack of level playing field for local companies. In this regard, the government should have policy for the local companies so they can participate in the bid and win that. India, China, Indonesia, Singapore, Malaysia and many other countries have public procurement guidelines where it is specified that 50% or more of public procurements must be done by local body. We also need similar law and guidelines to for our local players. Unavailability of skilled manpower is another great challenge to this sector. Besides, corporate tax for e-commerce companies and three levels of taxes at managerial level of the VC fund is creating problems for this sector. On the other hand, foreign e-commerce companies are unfairly stepping into local market and trying to knock out smaller local companies. To stop the aggression of foreign firms, there should have policy support and incentives in boosting the sector. Do you think the government should keep block allocation for developing ICT enabled skilled workforce? ICT skill development is a strategic move for all developing countries across the world since it ensures strong, sustainable and balanced growth. As a result, the government should seek special allocation and public investments in training young generation to enable them for the emerging ICT sector. The government is giving importance to create a knowledge-based society and it is a positive move. For reaping benefits, it should be implemented within a constructive system. Do you think a need-based academic curricula is instrumental for future generation? Can Bangladesh be able to compete with the competitors with short course? The education system of our country is more of theory-based than of practical application. Students are mainly focusing on academic result rather than innovation. Many IT graduates pass every year, but hardly know about the practical applications of their degrees. The authority should work towards replacing the theory-based curricula with a new one that will focus on practical knowledge. Academic and industry collaborations must be enhanced in the best interest of IT industry. The move will help new graduates from home universities become a perfect fit for IT industry. In meeting the target of $5 billion, what should the government offer for the export-oriented ICT products and services? The goal to achieve $5 billion export target by 2021 is simply ambitious. The government has made IT a focus area, and extended some favorable policies for its growth, but there is still a lot more things to do. The government should take initiatives to promote ICT sector of country as a brand. Besides, the government should strongly focus on technical skill development and innovation, as without innovative products and skilled services, it will be difficult for our country to survive the global competition. What should be the government policy support in the budget to boost the emerging e-commerce? E-commerce is rapidly increasing in Bangladesh as it already has around 1,000 entrepreneurs. As of proposed budget for the next fiscal year, the e-commerce sector people have to pay 35% corporate tax while there is VAT on digital marketing expenses for e-commerce businesses and also tax at source for e-commerce merchants. These will hurt the future prospects of e-commerce industry. I think the government should reconsider it before finalising the proposed budget. What measures should be taken to ensure proper use of the increased allocation? Implementation as well as monitoring of fund is a must to ensure proper use of increased allocation of fund. The government has to collaborate with different industry associations and work with them. It should know what the global best practices are in this regard and adopt them to properly utilise the fund.
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